A change in your job or career can be an exciting new adventure.
Maybe it leads you to a job or company you love, helps you transition out of a job you hate, or gives you an opportunity to explore a career path you hadn’t thought about.
Wherever your job change leads, leaving one job comes with many important decisions and considerations. Even if you don’t have a period of unemployment while you search, transitioning from one company to the next ultimately comes with financial adjustments.
Before officially giving your two-weeks’ notice, follow these three ways to financially prepare yourself for a job change.
1. Pad Your Emergency Fund
If you’re actively job searching or are transition to a job with a fluctuating income, padding your emergency fund is imperative before transitioning out of a job.
Job hunting is unfortunately not a quick process, which means you could be unemployed for a significant period of time. Before quitting, be sure to push extra income into your emergency fund to be prepared for any unexpected expenses or in case the job search takes longer than anticipated.
Moreover, it’s important to do so to accommodate for any transition costs as well. Whether there’s a difference in dress code and you need to adjust your wardrobe, or you have to cover moving or new commuting costs, having a larger emergency fund can help take care of it all.
2. Know What You’re Going to Do with Your 401(k)
Knowing what to do with your 401(k) is one of the biggest financial factors to figure out when changing careers. Although cashing out your401(k) is an option available to you, especially if you need the money to tide you over from one job to the next, you’ll usually lose money by doing so.
Instead, decide whether you’d like to roll it over into your new company’s plan or an IRA. Compare and research the fees and investment options associated with the new plan. Then decide what your best option is from there. Or if it’s an option available to you, you might want to consider keeping your former employer’s plan if it’s the best option available.
3. Have Transition Plans for Insurance
Whether you like it or not, health insurance is simply something you must have. In most cases, if you don’t have insurance you’ll have to pay a penalty.
If you’re leaving a job and don’t have another, or if there will be a gap in your coverage, you’ll have to find a solution. If you don’t have a spouse’s plan, you’ll probably have to consider COBRA, which allows you to continue your former plan by paying 100 percent of the premium. Or if that’s too expensive, you’ll have to consider getting a plan from Obamacare.
Whatever you choose, you’ll want to make sure you have the income and a plan to keep your health insurance up before transitioning out.
Changing jobs or exploring new opportunities in your career can be exciting and refreshing. However, transitioning out of your current job requires a lot more thought and process than simply giving your two-weeks’ notice. Before officially resigning, make sure you take the proper steps to financially prepare yourself for a major job change.
What have you found to be the best options for your health insurance and 401(k) when you’ve transitioned out of a job?- Kayla